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Can Red Cat Holdings Carve a Place in the Drone Industry

08 Apr Can Red Cat Holdings Carve a Place in the Drone Industry

Red Cat Holdings Inc (OTCQB: RCAT), a premier brand in the Drone industry, reported record quarterly revenues for its fiscal third quarter. The Company offers comprehensive products, services and solutions to the Drone industry through three wholly owned subsidiaries namely Fat Shark Holdings, Rotor Riot, LLC and Red Cat Propware.

Jeffrey Thompson, Chief Executive Officer of Red Cat Holdings, commented,

“We are pleased to report record quarterly revenues exceeding $2 million for our fiscal third quarter driven by the first full quarterly contribution from our Fat Shark subsidiary which was acquired in November 2020. Our Rotor Riot subsidiary is on track to attain record annual revenues for our fiscal year which ends on April 30. Finally, we look forward to the potential revenue contribution associated with the acquisition of Skypersonic which we expect to close in April.”

The Company has signed a definitive agreement to acquire Skypersonic Inc., a Company that offers drone products and software solutions including Skyloc a software monitoring system that enables remote monitoring of drones and Skycopter, a miniature drone designed to access difficult to reach locations. Skypersonic has multiple collaborations with Automotive OEM and commercial energy industries in markets such as US, Brazil, Europe, Middle East, and Asia.

Giuseppe Santangelo, CEO of Skypersonic Inc, commented,

“Combining the software solutions provided by Sklyoc, and those being developed in Dronebox by Red Cat, could result in a leading software operating platform across the entire drone industry.”

In January 2021, the Company filed an application for listing its shares on NASDAQ to capitalize on the rising trading volumes of its stock in 2021 and to increase the liquidity of its stocks. A listing on NASDAQ will not only ensure a wider exposure and visibility to the Company but also enable it to attract institutional and retail investors.  In addition, the move will also improve the liquidity of its stock and enhance long-term shareholder value.

Red Cat Holdings Inc (OTCQB: RCAT)

Market Cap: $107.65M; Current Share Price: 3.92 USDChart
Data by YCharts

The Business for Unmanned Aerial Vehicles (UAV) or Drones is burgeoning. They are now being extensively used, outside the purview of their original intent and purpose such as capturing aerial photographs or offering an unparalleled entertainment experience. However, the amalgamation of Drones with path breaking Virtual Reality (VR) technology is redefining the game in various fields, with drones now finding applications in areas such as military and defense, agriculture, engineering and construction.

In 2015, the Federal Aviation Administration heralded a new era for drones, by granting exemptions to companies engaged in construction, agriculture, insurance to operate drones in the U.S, while also making it mandatory for online registration of drones. The possibilities of its applications range from aerial inspections of mammoth infrastructural facilities such as dams and nuclear reactors, to use in space and capacity optimization in the construction industry.

Image Source: Unsplash

According to a report by Business Insider Intelligence, the sales of drones will be over $12 billion in 2021 growing at a CAGR of 7.6% from $8.5 billion in 2016. The growth will be majorly fueled by three segments namely consumer drone shipments, enterprise drones/ commercial drones and government drones. The use of drones in military and defense applications involves their use in monitoring, surveying and mapping and has extensive application in reconnaissance, surveillance and intelligence.

A report by marketsandmarkets estimates that the military drone’s market will reach USD 26.8 billion by 2025 from USD 12.1 billion in 2018, growing at a CAGR of 12.00%. We take a look at a few companies that are spearheading technological innovation in this field.

Red Hat Holdings Inc leverages the Blockchain technology to provide leading-edge storage, analytics and software for the Drone Industry. The Company’s technology caters to the needs of a reliable tracking system that addresses the needs of regulators, insurance companies and fleet management.

DroneBox is an encrypted storage and analysis flight log system that enables synchronization of varied data sources and easy integration. The Company has entered into strategic partnerships with some of the largest drone equipment suppliers that pushes its cost of engineering down by 40% and Cost of Operations by less than 30% than mainland US. In addition, the system is drone agnostic and offers a Patent Pending blockchain-based Cloud Architecture, besides having an Intellectual Property agreement with UPR Mayagüez.

Image Source: Company

The Company’s customer acquisition model focusses on low-cost customer acquisitions such as its partnership with Rotor Riot. Furthermore, the Company offers Freemium services to Race and Freestyle pilots and adopts a Per-Drone Monthly Revenue License model for SMB/Drone service providers. RCAT also offers customized services to platform and enterprise customers.

Rotor Riot, the Company’s wholly-owned subsidiary manufactures Hypetrain Motors that provide powertrain options for FPV drone pilots. The Company offers an online e-commerce site for ordering ready-to-fly drones and drone parts and has a dedicated community of over 200,000 subscribers for the published episodes of its Youtube show that has garnered over 25 million total views. Rotor Riot also sells a Drone and Game Controller through Apple Inc that is approved for iOS and USB-C devices. Furthermore, it has established meaningful collaborations with well-known drone brands such as DJI and Drone Racing League.

Red Hat’s other subsidiary, FAT Shark delivers an immersive flight experience through cutting-edge headsets for FPV (first person view) drones, that use radio technology to transmit real-time images from a drone to the pilot.

“Red Cat’s key differentiator is the integration of several separate systems into one easy to use platform (hardware and software) that covers the entire spectrum from data tracking, storage, analytics, and reporting.” JEFF THOMPSON, RED CAT CEO

In February 2021, the Company’s subsidiary Fat Shark Holdings, received approval for its patent application covering the optical architecture of its FPV (first person view) headsets, that facilitates the creation of a higher performance headset at a lower cost.

Image Source: Company

Key Takeaways

  • The use of drone technology has received an impetus by the ongoing COVID-19 pandemic with the use of drones being adopted by business services and civil applications, marking a shift from primarily being used in military or hobby applications. Drones can revolutionize operations in a wide array of industries such as construction, agriculture, oil, gas and mining among others.
  • The Industry suffers from lack of standardization, shortage of experienced pilots, high latency and challenges in remote operation. The Company seeks to overcome these issues by creating a platform that not only ensures compliance with the regulatory norms but also standardizes flight data collection.
  • The Company’s acquisition model focusses on low-cost customer acquisitions such as its partnership with Rotor Riot with focus on acquiring companies that offer advanced and specialized drone operational platforms and are backed by robust intellectual property.
  • RCAT is helmed by SLGG is helmed by an experienced management team that has a wealth of experience in leading companies and is fully equipped to handle the challenges posed by a rapidly maturing drone market.
  • Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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